Ravi Chandran
When financial statements are not in proper order, or do not give the bank a fuller picture of the financial health of the company bank loan application rejection is a real possibility
How Can Small Businesses Obtain Financing without their without bank loan application rejection?
Table of Contents
In any country, Small and medium enterprises employs the most people, yet are the most under-funded.
The success and failure of a business is often the availability or lack of funding. Small businesses often do not have money to employ a Chief Financial Officer or a financial controller or someone who would help them to assess funding needs as hiring these people could easily set them back between S$80,000 to S$150,000 per annum at the least.
Most businesses have an accounting function to handle operational matters but not funding and strategic financial matters. This is a gap that differentiates a small and medium business with that of larger successful businesses.
Hence many small businesses continue to suffer on several fronts and face bank loan application rejection.
- Missed opportunities due to lack of funding
- Unaware of government grants or funding
- Higher funding costs.
- Unhealthy Cash Flow and quick ratios.
- Lack of strategic financial planning.
Hence trusted consultants are here to be your long term business partners for business growth for the next 3 to 5 years.
Risks of bank loan application rejection
Many businesses may not dedicate enough time to finance and accounting. Their financial statements are also not in proper order, or do not give the bank a fuller picture of the financial health of the company.
Failure to get a loan in one bank can be potentially detrimental for your future loan applications at other banks.
What is the SME loan process by trusted loan specialists?
Trusted loan specialists follow a 4-step process to maximize the chance of loan success and in obtaining a larger loan quantum.
| 1 | Consultation and Assess | To understand company’s financial situation. Sign contract with trusted loan consultants (no upfront fee). |
| 2 | Profile and source | Create a profile and source for funding products. Assess your chances of success through informal channels. |
| 3 | Reports and Justifications | We prepare a confidential report along with your loan submission to our lenders to highlight the key strengths of the company. Other loan consultants do not do this. |
| 4 | Loan Approval | You only pay us a fee upon successful loan approval. |
Illustration:
Benefits of using trusted Loan Consultants
- Well versed with Bank’s lending criteria
- Fast processing time
- Higher approving loan amount
- High success rate
- No upfront fees
Qualifying Criteria
- Locally incorporated company with 30% local share holding
- Minimum 2 years in operation Annual turnover > $300K
- Annual turnover > $300,000
Those not meeting the criteria can be assessed on a case-by-base basis.
There are myriad choices of funds such as SME team loans, overdrafts, floor stock financing, microloans, government grants, spring grants, etc. Each has different criteria to meet.
One of the key challenges for many small to medium businesses is working out how to approach the bank with a loan application. Small businesses often look to finance their business needs with debt.
Your business needs to make a profit, so does a bank. When you approach a bank for financial assistance, you are asking the bank to go into business with you. You are asking the bank to consider your business plan, agree with your strategy, approve your expenditure and accept some of the risk that the business may not succeed. Banks are in the business of supporting sound and viable financial decisions, therefore every request must be considered on its own merits.
Banks have to consider risk when evaluating loan application and you need to understand this to clinch loan quickly
The bottom line for a bank is: how much risk do we take on with this project? Will we make a profit, or are we more likely to make a loss? Each bank has its own guidelines to help it decide if a business proposition is worth pursuing or not.
Many of the applications a bank receives will not be approved, simply because the risk the bank is required to carry is too high, or because it believes the applicant can not support the risk either. Banks are regulated by the Monetary Authority of Singapore (MAS) which requires banks to make prudentially responsible lending decisions – the more risk the bank takes, the more capital it has to hold against that lending.
Banks also quantify risk according to their own lending portfolio. A bank may decline a loan application to a viable business based on the fact they are overexposed in the sector the business is in.
In a competitive market, banks will package finance products under different names and introduce a range of features to differentiate themselves. In matching a debt product and selecting the appropriate features to suit your business requirements, you need to determine the following about your business:
- What the funds are going to be required for and how long do you require the funds for– for example, to fund the purchase of inventory or to fund a building extension?
- Be realistic about the amount of funds you require and can afford.
- What level of security can you offer? How will the bank view the value of the security?
- How will the bank assess ‘risk’ for your business?
So what can you do to avoid bank loan application rejection? Know three things to clinch loan quickly – information, security and experience.
The more quality information the bank has about your business, your plans and your industry, the more likely you will be successful in your loan application. The objective of preparing a loan application is to show the bank that you run a viable business and therefore providing you with a business loan is a low risk proposition.
